Months prior to their birth certificates, and a year before their first real steps, some children have an established footprint—a digital footprint, that is. A survey by Internet security company AVG reveals that 34 percent of mothers around the globe posted their unborn child’s ultrasound image online. Seven percent of those mothers gave their baby an email address, and 6 percent gave their baby a social networking profile. Before a little one speaks her first words, there’s a good chance her name and even her photograph can be found on the Web. Whether or not infants start off with a digital presence, most will grow up with one, changing the way today’s children consume and share information.

However, those who aren’t mindful of their privacy might pay a hefty price. Duke University student Karen Owen learned the hard way about the viral nature of the Web when after emailing her sexual escapades to only a few friends, they became an overnight sensation, appearing on mainstream blogs and news sites. Owen perhaps underestimated how quickly content can be taken from private to public with the ease of social media sharing. It’s likely that Owen also underestimated the interest that others would take in her personal affairs.

Many of today’s teens are more careful, removing tags on Facebook, carefully selecting whom they follow on Google Buzz, and what information they share with family and friends on other social networks. An October study by online privacy seal and services comany TRUSTe, titled “The Kids Are Alright,” shows that 66 percent of teenagers say that it’s important for them to control who gets to see their information on a social networking site. And, 80 percent of teens have at some point used privacy settings to tweak who can view certain content. This demonstrates how pervasive privacy issues have become, making it increasingly difficult for marketers trying to capture relevant customer data.

Marketers are trying to tap into customer data to which customers haven’t exactly given them access. And third-party companies are trying new—and sometimes creepy—methods to get it. The issue of privacy is at a pinnacle because of the proliferation of social network data and the sheer desire of businesses to do something with it. So, how should marketers proceed? Where is the line between questionable and acceptable customer data gathering initiatives?

Marketing Missteps

Paul Greenberg, founder of CRM consultancy The 56 Group and author of CRM at the Speed of Light, is a public figure and, in a sense, brand. A prolific speaker and writer, Greenberg is an open individual, unafraid to express his opinions—from enterprise software to Yankees baseball. Undoubtedly, Greenberg has a following. So, when he learned that he, on Facebook, was giving a free advertisement for inbound marketing software company HubSpot, he was more than surprised. “This was me giving an endorsement,” Greenberg says, “which, on Facebook, I don’t do—I will only do that in my own vehicles. Was it inaccurate? No, but it was the way it got used that was questionable.”

Greenberg says that he is able to rationalize Facebook using him as an advertisement for HubSpot—as strange as it initially was—because Facebook is a free service and he realizes it has to make money somehow.

Multiple studies have shown that connecting with contacts, not businesses, is the top reason for social networking activity. An Invoke Live report says that 63 percent of survey respondents list “staying connected” as their primary reason for social media involvement. The same report, interestingly, says that more than one third of Facebook members have expressed concern or changed their opinion about Facebook because of its murky stance on user privacy and content ownership. Could this have something to do with Facebook opening its doors to businesses and advertisers? Possibly. Consumers want to stay connected—but don’t necessarily want to trade in privacy and personal data in the process. “It’s the ‘I want it all for free model,’ ” Greenberg says.

Mike Spinney, senior privacy analyst at Ponemon Institute, remarks that, as a whole, consumers forget that there are trade-offs with free destinations such as Facebook. Facebook advertisements that suggest you become a fan of a brand because your contact “likes” it may seem controversial, but Spinney suggests consumers will adapt to them just as they did to commercials on television. “What we have seen now in terms of marketing on Facebook or on Twitter with sponsored tweets, these are part of that evolution,” he says. “You can go back to the early days of TV. We don’t think twice about commercials anymore, but when they started appearing on TV, that was a controversial thing.”

Spinney argues that it boils down to education: Marketers need to learn how to execute media campaigns well on social media without crossing the line; consumers, for their part, need to learn how to protect—or not share—the information they don’t want to be used. “The reality is simple—if a customer is putting this out somewhere, then it’s available for someone to capture,” Greenberg says. “Do they have a right to privacy? Well, they have a right to have that not misused.”

Since the backlash in the spring of 2010 of what data its users have control over, Facebook has taken a few notable steps to provide greater transparency around what and how content can be shared. But it still seems that for every change Facebook makes, a new problem surfaces. Shortly after Facebook began prompting its users to evaluate their personal data sharing with granular options, it became known that personal information was being compromised by its third-party applications (such as Zynga’s popular Mafia Wars).

Consumers learned that when they pass through the virtual Facebook walls to interact within a third-party application, data can be gathered by companies like Rapleaf. The Wall Street Journal highlighted Rapleaf’s practices, an organization dedicated to delivering “meaningful, personalized online experiences” (according to its Web site), in several stories about privacy. Not only does Rapleaf sell personal data from popular Web sites to hungry advertisers, but it also gives data that can be easily assembled to identify a real person. The Wall Street Journal reported on an emerging business practice called data scraping in the article “ ‘Scrapers’ Dig Deep for Data on Web.” The article highlights a healthcare (yes, healthcare) community forum called PatientsLikeMe that not only sells its data—which it claims to be anonymized prior to the sale—but also allows a data scraping company to access the personal identities, posts, and attributes to its site visitors.

There are no regulations on the books yet for data scraping practices. “It would be a mistake at this stage for there to be overregulated [initiatives],” Spinney says. “But I think there needs to be some level of protection that is afforded the consumer.” As much as a consumer tries to protect her identity, there are always practices—disguised as “personalizing the experience”—that she’s not going to be aware of.

“These stories are so high-profile now that everyone is thinking about [privacy],” says Brent Leary, the founder of CRM Essentials.Leary relays that at a conference in October 2010, small business owners and entrepreneurs were expressing their concerns about privacy and how to protect their customers. After all, consumers want to buy from businesses they trust.

Methods to protect consumers’ privacy can have a positive impact on their perception of a brand and their willingness to make a purchase. Debnroo, an online retailer of home, garden, and pet products, noticed a sales lift of 29 percent after placing a TRUSTe privacy seal on the header of each of its Web pages. Although other factors could have come into play, Debnroo attributes the lift solely to the seal on its e-commerce site, according to Chris Babel, CEO of TRUSTe.

Privacy can also impact customer satisfaction. In the 2010 results of the annual ForeSee study of customer satisfaction, privacy entered the picture when Facebook fell to the bottom of the rankings. Its score was 16 points lower than what ForeSee Results President and CEO Larry Freed says is a good customer satisfaction score. He remarks that with that kind of score, “if people had a viable alternative to Facebook, they would look into that, but to a great extent, there aren’t a lot of alternatives.”

Incidentally, Facebook is a TRUSTe customer. Babel insists that it’s natural for Facebook to encounter missteps because it’s “going places they’ve never gone before”—and places no other Web site has gone, or dared to go, before. He points out the granularity that Facebook has taken in giving its users control.

Getting Comfortable

Greenberg states that consumers are much more comfortable with giving up information when they are able to see it after the fact. They also want to be able to access it. “Most human beings, most customers, don’t care that you record their transactions,” Greenberg says. “In fact, they are kind of happy that you do as long as they have access to them. When it comes to customer service, it’s extremely useful.”

If that data were spread to social networks—or sold to another company—they might not be as pleased. Instead, they might find it creepy or invasive. However, industry pundits suggest that there are some levels of discomfort that consumers might have to overcome. With social network data, Spinney says, consumers need to realize that because they put it in there, it’s going to get used and searched. “It’s like expressing outrage over the fact that I can find your name in the phone book and that I can tell you have a phone,” he says. “The consumer should take more responsibility for understanding how these platforms work and what is being done with the information being made public.”

Babel echoes that sentiment, adding that “the technology has grown rapidly and the end-user education hasn’t.”

Privacy and the Future

What will become of these privacy issues? In an exclusive press session at the September Web 2.0 Expo, Tim O’Reilly, founder and CEO of O’Reilly Media, expressed his views on privacy, largely taking the stance that privacy will become less of an issue in the next few years. “The current privacy thinking is going to break down and change,” he said. “It’s too useful for a service to know more about you.” Social media sites are also doing their part to encourage more trusting behavior. “People have really gotten comfortable not only sharing more information and different kinds, but more openly and with more people,” said Mark Zuckerberg, Facebook’s founder and CEO, at the Crunchi awards in January 2010.

O’Reilly recognized that Congress could limit some of the advances in personal data discovery, but he asserts that doing so is not good for business. “There are architectures that are privacy-preserving, but they’re not business model-preserving,” he says. This suggests that too many privacy regulations will hinder a company’s ability to compete. “Marketers have a job to do,” Ponemon’s Spinney says. “They have to get a message in front of an audience and do it in a way that will enhance brand value and motivate buyers in a positive way.”

That function has been consistent in the history of marketing, Spinney insists. Marketing on the social Web is no exception. If anything, it’s more of an opportunity to gain customer insight. Consumers prefer more intelligent ads, anyway, Spinney notes. If a person has to sit through a Web commercial for 15 seconds to view his favorite YouTube video, he’d probably rather sit through one about something he is interested in than something irrelevant.

While Greenberg doesn’t discourage marketers from using online customer data, he contends that customers should have a say in how a company uses their information. “The consumer thinks more like this: I am willing to tell you about my life. What I am not willing to do is let you use that as an asset without my permission. You can read it, but you can’t use it without my permission.”

Privacy concerns may wax and wane but organizations must assess and reassess their privacy efforts. For businesses, Babel says, “You have to continually analyze it [privacy].”

Leary notes that companies are spending big bucks on privacy consultations and for certifications from companies such as TRUSTe. Companies realize that if it’s a problem for consumers, it’s a problem for businesses, too.